National Company Law Appellate Tribunal
Dr Vijay Radhakrishnan vs Cs Bijoy P Pulipra Rp Pvs Memorial ... on 9 July, 2021
NATIONAL COMPANY LAW APPELLATE TRIBUNAL, CHENNAI
(APPELLATE JURISDICTION)
Company Appeal (AT)(CH)(INS) No. 90 of 2021
Under section 61 of Insolvency and Bankruptcy Code, 2016)
(Arising out of Interim Order dated 22.02.2021 passed in IB/46/KOB/2021
in IA(IBC)/13/KOB/2021 in TIBA No 11/KOB/2019 passed by the National
Company Law Tribunal, Kochi Bench)
In the matter of:
Dr. Vijay Radhakrishnan ...Appellant
R/o 4D, Express Estate,
Next to Aj Hall,Kaloor,
Ernakulam, Kerala - 682017
V
Bijoy P Pulipra, Resolution Professional ...Respondent
PVS Memorial Hospital Pvt. Ltd.
Ground floor TC-11/789(1), Vayal Road,
(Plamoodu-Nalanda Junction Road)
Nanthancode, Kowdiar, P.O. Kerala 695 003
Present:
For Appellant : Mr. Ananth Merathia, Advocate
For Mr. Sankar P Panicker, Advocate
For Respondent : Mr. Bijoy P Pulipra, Resolution Professional
JUDGMENT
(VIRTUAL MODE) Venugopal M(J) Preface:
The Appellant has filed the present Appeal and has aggrieved the person being dissatisfied with the Order dated 22.02.2021 passed by the 'Adjudicating Authority' (National Company Law Tribunal, Kochi Bench in IA(IBC)No.46/KOB/2021 in IA(IBC)/13/KOB/2021 in TBA No.11/KOB/2019).
Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 1
2. The 'Adjudicating Authority' (National Company Law Tribunal, Kochi Bench) while passing the 'Impugned Order' dated 22.02.2021 had among other things at paragraph 18 to 22 had observed the following:
"The only question to be decided is as to whether the applicant is eligible to get the reliefs to reject the Resolution Plan submitted by the Resolution Applicant M/s. Lissie Medical Institutions and also to reject the valuation report filed by Mr. R.K. Patel and to appoint another valuer convening another CoC.?
19. The bare reading of the history of the case mentioned above makes it crystal clear that the Resolution Professional took all steps as per the provisions of IBBI Regulations, before submitting the Resolution Plan to the CoC for its approval. Thereafter, only after the approval of CoC, the Resolution Professional filed the Resolution Plan for approval of this Adjudicating Authority. It is seen that wide publicity has been made inviting Expression of Interest for getting a prospective Resolution Applicant, so that the maximum value be received for the Corporate Debtor's properties. If the contention of the applicant is accepted, a question arises here why any other interested persons, who can offer a more valued Resolution Plan than the present one has not come forward to submit a Resolution Plan. The technical stags stated by the applicant that one of the valuer assessed a less value and other valuer has given a good value cannot be accepted. The value assessed by both the valuers are more or less same, except few difference in the value. The resolution professional has not accepted the value given by Mr. Patel only. He has computed the value in accordance with the internationally accepted valuation standards, after physical verification of the fixed assets of the Corporate Debtor. The Fair Value and value arrived at by both groups of the registered valuers were not significantly different. Hence, he has not appointed a fresh valuer. In this respect the decision rendered in the case Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 2 Maharashtra Seamless Limited vs. Padmanabhan Venkatesh & Ors. (Civil Appeal No. 4242 of 2019 is relevant in which it is stated that:
"Object behind prescribing the valuation process is to assist the Committee of Creditors ("CoC") to take decision on a Resolution Plan properly and there is no statutory mandate under the Code that the bid of the Resolution Applicant should match the liquidation value arrived at in accordance with Regulation 35 of the CIRP Regulations."
20. This Tribunal finds that the Resolution Professional had compiled with the provisions of Regulation 27 and 35 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, before arriving at a decision to place the Resolution Plan before the CoC. The CoC approved the Resolution Plan with 100% voting right for approval by the Adjudicating Authority. Under Section 31(1) of the Code, for final approval of a Resolution Plan, the adjudicating authority has to be satisfied that the requirement of Sub Section (2) of Section 30 of the code has been compiled with. On a verification of the Resolution Plan submitted by M/s Lissie Medical Institutions it is seen that requirement of Sub- Section (2) of Section 30 has been followed before submitting the Resolution Plan for the approval of the Adjudicating Authority. Section 31(1) of the Code lays down in clear terms that for final approval of a Resolution Plan, the Adjudicating Authority has to be satisfied that the requirement of Sub-Section (2) of Section 30 of the Code has been compiled with. The proviso to Section 31(1) of the Code stipulates the other point on which an Adjudicating Authority has to be satisfied. In the case of Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta, decided on 15th November, 2019 in Civil Appeal Nos. 8766-8767 of 2019 (2019 SCC Online SC 1478).) it was held that the scope of interference by the Adjudicating Authority is limited Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 3 judicial review. The relevant portion of para 46 of the said judgement is quoted below:
46... ... ... ....This being the case, judicial review of the Adjudicating Authority that the resolution plan as approved by the Committee of Creditors has met the requirements referred to in Section 30(2) would include judicial review that is mentioned in Section 30(2)(e), as the provisions of the Code are also provisions of law for the time being in force.
Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of. If the Adjudicating Authority finds, on a given set of facts, that the aforesaid parameters have not been kept in view, it may send a resolution plan back to the Committee of Creditors to re-submit such plan after satisfying the aforesaid parameters. The reasons given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal.
21. In this respect, it is worthwhile to note that when the Resolution Professional has filed the Resolution Plan before this Tribunal, on a Caveat Petition, this applicant was also heard on 28.1.2021 and he has been given time to make his objection, if any, and the pronouncement of the approval of the Resolution Plan was fixed on 22.2.2021. However, the applicant approached with this IA only on 12.2.2021 (after curing the defects), i.e., the last moment when the Plan is to be approved. It seems, this is only a delaying tactics putting hurdle in the process of approval of Resolution Plan by this Adjudicating Authority, which cannot be accepted. As rightly stated by the Resolution Professional, that if the applicant is aggrieved by the Resolution Plan approved by this Tribunal, under Section 61(3) the applicant can very Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 4 well have the remedy of appeal before the appropriate forum for redressal of his grievances. In view of the pronouncements of the Hon'ble Supreme Court and the Hon'ble NCLAT, as stated earlier in this order, this Tribunal cannot entertain the claim put forward by the applicant herein for rejection of the Resolution Plan at this stage."
and consequently dismissed the 'Application' without costs. Appellants' Submissions:-
3. The Learned Counsel for the Appellant submits that the Appellant/Applicant is a Doctor by Profession and was working with "PVS Memorial Hospital" (Corporate Debtor) and further that he is the 'Power of Attorney Holder' of 46 Doctors who were also working with the 'Corporate Debtor'. Further, it is represented that few of the Doctors who had signed the original 'Power of Attorney' were employees of the 'Corporate Debtor' and do not have a grievance to per se posts "Approval of the Plan" and thereby they do not wish to endorse the 'Power of Attorney' for the purpose of the present 'Appeal'.
4. The Learned Counsel for the Appellant contends that the 'Adjudicating Authority' had not appreciated the fact in a proper perspective to the effect that the 'Resolution Plan' prepared was based on 'faulty Valuation Report' with variance of 15.62% amounting to a difference of Rupees Seven Crores and is in violation of Section 30(2) of the Insolvency and Bankruptcy Code and 35(1)(a), 35(1)(b) and 35(1)(c) of the Regulations.
5. It is the version of the 'Appellant' that the 'Adjudicating Authority' had failed to take into account the important fact that by holding the 99.2% to the 'Employee Doctors' under the category of 'Operational Creditor' - Employees - 2.35% to 'Consultant Doctors' under 'Operational Creditor' - except employee), the balancing of interest as envisaged in the preamble of the Insolvency and Bankruptcy Code and guided in the decision of Hon'ble Supreme Court in Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 5 'Committee of Creditors' of Essar Steel India Ltd. v 'Satish Kumar Gupta' dated 15.11.2019 vide Civil Appeal No.9877-8767 of 2019 reported in 2019 SCC online SC 1478 was not followed.
6. The Learned Counsel for the Appellant points out that the 'Adjudicating Authority' had committed an error in considering that the 'Operational Creditor's were paid a bare minimum of 2.34% of their dues although their nature of work precedents against the 'Operational Creditor' being taken in a ride.
7. The Learned Counsel for the Appellant comes out with a plea that there was non-application of mind by the 'Adjudicating Authority' while dismissing the application filed under Section 60(5) of the Insolvency and Bankruptcy Code.
8. The Learned Counsel for the Appellant takes a stand that the claim of the Appellant 'Doctors' were filed under 'Form-B' only because of the technicality that the 'Appellants' were not on the pay role of the 'Corporate Debtor', however, thus insisting the need to file under Form-B instead of the proper Form-D. As a matter of fact, the nature of work and service rendered by the Appellant 'Doctors' who are paid a Professional/Retainership Fee and those rendered by Doctors who had submitted 'Claim Forms' as employees though they are termed as 'Full time Consultants' are similar.
9. The Learned Counsel for the Appellant contends that the 'Valuation Report' itself is faulty and the relevant point is, can the 'Resolution Plan' and the 'Committee of Creditors' and at the approval stage, the 'Adjudicating Authority' in spite of being alerted by the 'Appellant' sanction the 'Resolution Plan' and afffirm that such plan had complied with the ingredients of Insolvency and Bankruptcy Code, 2016.
10. The Learned Counsel for the Appellant submits that the two 'Registered Valuers' had adopted different valuation method and the same was not questioned by the 'Resolution Professional' nor was a 'third Valuer' was appointed. In fact, Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 6 the Respondent had not complied with Section 30(2)(e) and Section 30(2)(f) of the Code and Regulation 35 1(a), 1(b), 1(c) of the IBBI Regulations 2016.
11. The other argument projected on the side of the Appellant is that can the 'Committee of Creditors' make decisions for the portion and amount in 'Resolution Plan' which is beneficial only to them or the 'Resolution Applicant', ignoring the other 'Creditor's interests.
12. The Learned Counsel for the Appellant contends that the 'Corporate Debtor' was non-functional for two years and that the infrastructure of the 'Corporate Debtor' is now utilized as a "COVID Care Facilities" with aid from the Government. Also that the Kerala State Electricity Board has reinstated the electricity connections.
13. The Learned Counsel for the Appellant brings it to the notice of this 'Tribunal' that the 'Valuation' was conducted during the period 30-01-2020 to 25-02-2020, when the 'Corporate Debtor' premises was in standstill and that of value of the property would have gone up exponentially due, resumption of business. Apart from that, the 'CIRP' was conducted during the lock down period and that only one eligible bidder and further that sufficient opportunity was not given for a better bid.
14. The Learned Counsel for the Appellant submits that during the 'CIRP' the enhancement of the 'Resolution Plan' amount from Rs.80 Crores to Rs.126 Crores is a mere eye-wash, as it was evaluated based on a faulty valuation and further taken into consideration without keeping the best interests of the 'Corporate Debtor'.
15. The Learned Counsel for the Appellant adverse to the Report of Valuer Mr.R.K.Patel who had mentioned in the report as under:-
"It is submitted that the Report of R.K.Patel has mentions as follows:
-- "...the matter was taken up at the instance of resolution Professional Mr.Bijoy Prabhakaran Pulipra ... In the matter of M/s. Galaxy Cotton & Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 7 Textile Private Limited.." (vide Annexure 6, Vol I, Pg 199 of the Appellant Paper Book) "....for evaluating Fair Value of the Land and Building, the subject land is assumed to be uncultivated freehold and owned by the M/s. Galaxy Cotton and Textile Pvt. Ltd..." (vide Annexure 6, Vol II, Pg 209 of the Appellant Paper Book) "....for evaluating Liquidation value of the land and Building, entire land has been assumed to be owned by the Government and property is given on leas to M/s. Gupta Syunthetics Ltd..." (vide Annexure 6, Vol II, Pg 209 of the Appellant Paper Book) "....for evaluating Fair Value of the Land and Building, the subject land is assumed to be uncultivated freehold and owned by the M/s. Galaxy Cotton and Textile Pvt. Ltd..." (vide Annexure 6, Vol II, Pg 209 of the Appellant Paper Book) and submits that this cannot be a mere inadvertent error on part of the valuer as it gives a completely different meaning to the ownership and possession of the land. As a matter of fact, on behalf of the Appellant, the difference between the 'Valuer Reports' are mentioned as under:
RK PATEL TOM THOMAS
PANIKULAM
Mentions that land is owned by Mentions that land is owned by
3rd party (Annexure 6, Vol II, Pg CD (Annexure 7, Vol II, Pg
199, 209 of the Paper Book) 290 of the Paper Book)
Average value per Are = Average value per cent = Rs.42
Rs.1,20,00,000 (which is Lakhs, Rs. 22.50 Lakhs, Rs.15
Rs.48.56 lakhs per cent approx.) Lakhs, Rs.1 11.25 lakhs due to
(Annexure 6, Vol II, Pg 211 of the unique shape of land - belt
Paper Book) method used (Annexure 7, Vol
II, Pg 300 of the Paper Book)
An average value has been Belt method adopted hence
obtained at Rs.1,20,00,000 p/ Are different value obtained for
(Annexure 6, Vol II, Pg 211 of the each piece of land due to the
Paper Book) unique shape of the land.
Comp App (AT) (CH) (Ins) No.90 of 2021
Page | 8
(Annexure 7, Vol II, Pg 209 -
301 of the Appeal).
16. The Learned Counsel for the Appellant points out that the rate per cent value furnished by Mr.R.K. Patel can be calculated by converting the 78.54 Ares as identified in the report as the total area in Ares which is equal to 194.0765666 cents and that the Fair Value provided is Rs.94,24,80,000/- which is divided by the total area viz. 194.07 cents, which is equal to Rs.48,56,235 per cent (vide Annexure 6 Volume 2 Page 210, 211 of the Appeal Paper Book).
17. The Learned Counsel for the Appellant contends that the value report of Mr.Tom Thomas Panikulam cane be identified that the valuation is done in a method known as 'belt method' which is sub-categorized the land into separate sections to enable to identify the area of land based on its unique size and that the per cent value provided is in the value of Rs.42 lakhs, 22.50 lakhs, 15 lakhs, 11.25 lakhs for the different survey numbers and for ease of calculation Rs.42,00,000 can be identified as the value per cent (vide Annexure 7, Vol II, Page 299, 300).
18. The Learned Counsel for the Appellant refers to the Valuation Report of Mr.R.K. Patel which is in Tabular Form runs as under:-
Valuation report of R K Patel
Hospital Area 78.54 Ares 194,0765666 Annexure 6, Vol
cents II, Pg 211 of
Per cent value 48,56,228 Appellant Paper
Fair Value for 94,24,80,000 (A) Books
194.07 cents
Valuation report of Tom Panikulam
Hospital Area 78.54 Ares 194,0765666 Annexure 7, Vol
cents II, Pg 298 of
Per cent value 42,00,000 Appellant Paper
Fair Value for 81,51,21,580 (B) Books
194.07 cents
Difference in FV for 194.07 Cents (A- 12,73,58,420
B)
% 15.62%
Comp App (AT) (CH) (Ins) No.90 of 2021
Page | 9
19. The Learned Counsel for the Appellant refers to the Valuation Report of Mr.Tom Panikulam which is shown as under:-
Valuation report of Tom Panikulam
Hospital Area 78.54 Ares 194,0765666 Annexure 7, Vol
cents II, Pg 298 of
Per cent value 42,00,000 Appellant Paper
Fair Value for 81,51,21,580 (B) Books
194.07 cents
Difference in FV for 194.07 Cents (A- 12,73,58,420
B)
% 15.62%
20. The Learned Counsel for the Appellant submits that the difference in adopting varying methods of valuation had led to a difference in the value which technically paved the way for the appointment of third Valuer as provided in Regulation 35(1)(a), (b) and (c) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. However, for the reasons best known to the Resolution Professional, the third Valuer was not appointed and as such, the 'CIRP' was not conducted as prescribed by the Code of Regulations.
21. The Learned Counsel for the Appellant advances an argument that 'Committee of Creditors' is a creature of the statute and that although the commercial decision prevails, it cannot be such that it over throws and ignores the rights of the other stakeholders and deviates from the object of the Code.
22. The Learned Counsel for the Appellant contends that the 'Employee Doctors' receive 'fixed salary', but the 'Consultant Doctors' receive 'fixed retainer fee' and that the 'Employee Doctors' are mostly 'juniors' and the 'Consultant Doctors are 'Senior Experienced Professionals'.
23. The Learned Counsel for the Appellant submits that in the 'instant appeal', the 'Valuation Report' was conducted in a negligent manner and as such, the decision of the Hon'ble Supreme Court in Maharashtra Seamless Limited V Padmanabhan Venkatesh and Ors. Reported in 2020 SC 3779 will not apply to Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 10 the present case, because the 'Valuation Report' in question in the Hon'ble Supreme Court's Judgment was made in a fair and equitable manner.
24. The Learned Counsel for the Appellant refers to the decision of Hon'ble Supreme Court in "Committee of Creditors of Essar Steel India Limited v Satish Kumar Gupta and Ors. Reported in 2020 (8) SCC at Page 531 wherein it is observed as under:
"40. What is left to the majority decision of the Committee of Creditors is the "feasibility and viability" of a resolution plan, which obviously takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. As an example, take the case of a resolution plan which does not provide for payment of electricity dues. It is certainly open to the Committee of Creditors to suggest a modification to the prospective resolution Applicant to the effect that such dues ought to be paid in full, so that the carrying on of the business of the corporate debtor does not become impossible for want of a most basic and essential element for the carrying on of such business, namely, electricity. This may, in turn, be accepted by the resolution Applicant with a consequent modification as to distribution of funds, payment being provided to a certain type of operational creditor, namely, the electricity distribution company, out of upfront payment offered by the proposed resolution Applicant which may also result in a consequent reduction of amounts payable to other financial and operational creditors..."
"46... If the Adjudicating Authority finds, on a given set of facts, that the aforesaid parameters have not been kept in view, it may send a resolution plan back to the Committee of Creditors to re-submit such plan after satisfying the aforesaid parameters. The reasons given by the Adjudicating Authority only from this point of view, and once it is satisfied that the Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 11 Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal..."
25. The Learned Counsel for the Appellant points out the decision of Hon'ble High Court of Bombay in the "The Commissioner of Income Tax (TDS) v Grant Medical Foundation Reported in 2015 (275) C TR (Bom) 253 - Vol II, Annex 8; Pgs 329 to 340 wherein at paragraph 42 it is observed as under:
"42.......Our findings or the Tribunals order being upheld does not mean that we have laid down any absolute rule or principle of general application. In such cases, depending upon the attending facts and circumstances, the terms and conditions of the engagement, a finding can be arrived at that there is a master servant or an employer-employee relationship. It can be arrived at in cases where it is found by the Income
- Tax Authorities that though there is not a regular process of recruitment and appointment but the contract would indicate that the doctor/professional was appointed as an employee and on regular basis."
1. The Learned Counsel for the Appellant contends that the 'Adjudicating Authority as per Section 31 of the Code is enjoined to approve 'Resolution Plan' only subject to compliance of Section 30(2) of the Code. Further, it is the submission of Learned Counsel for the Appellant that by violating the Regulation 35(1)(a), (b) and (c) the whole object of the CIRP is vitiated and therefore, the 'Adjudicating Authority' can either send back for review to the 'Committee of Creditors' or reject the proposal in a summary manner. In short, the Appellant in the present Appeal prays for the 'Resolution Plan' and being remitted back to the 'Committee of Creditors' for reconsideration and re-evaluation.
Respondents' Contentions:-
26. The Learned Counsel for the Respondent submits that the discrepancies in the 'Valuation Report' submitted by one of the 'Registered Valuers' Mr.R.K. Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 12 Patel identified by the appellant are merely clerical errors caused due to inadvertence. Further the Valuation was made by the two independent registered Valuers registered with the IBBI under the Companies (Registered Valuers and Valuation) Rules, 2017 and that the Fair Value and the Liquidation Value of the 'Corporate Debtor' was computed in accordance with internationally accepted valuation standards, after physical verification of the inventory and fixed assets of the 'Corporate Debtor'. In short, the inadvertent clerical errors crept in, while typesetting the 'Valuation Report' are not material in nature and had no material impact on the Fair Value as well as the Liquidation Value. Apart from this, the Fair Value and the Liquidation Value of the 'Corporate Debtor' arrived at by the groups of Registered Valuers were not significantly different and therefore there was no requirement to appoint another 'Registered Valuer' by the 'Resolution Professional' to submit an estimate of the value, computed in the same manner.
27. The Learned Counsel for the Respondent contends that the 'Valuation Report' is only an estimate to assist the 'Committee of Creditors to take a commercial decision and the same is not mandatory document to be relied upon by the committee to take a decision on the 'Resolution Plan' in front of it.
28. The Learned Counsel for the Respondent points out that the summary of the 'Valuation Report' furnished by the two Registered Valuers are as under:-
Sl.No. Name of the lead Fair Value (as on Liquidation Value Registered Valuer 31st March, 2019) (as on 31st March, (Amount in 2019 (Amount in Crores) Crores) 1 Mr. Jigar Shah 160.85 121.46 2 Mr.Reuben 163.61 124.35 George Joseph Also that the values arrived at by the 'Registered Valuers' are mere guiding factors to the 'Committee of Creditors' to take a commercial decision and the said values are not binding on the 'Committee of Creditors'. Added further 15.62% Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 13 variance in the value of the land in two reports is not a significant variation as the Fair Value and Liquidation Value has been arrived at based on many other factors.
As a matter of fact, variance in Fair Value between the two states of Valuation Reports are only of Rs.2.76 Crores (that is 1.71%) and the variance in Liquidation Value between the said two reports are only of Rs.2.89 Crores (62.37%). In short, the minor variations of 1.71% and 2.37% are only to be ignored because of the fact they are not of a significant difference.
29. The Learned Counsel for the Respondent relies on the Judgment reported in Civil Appeal No.4242 of 2019 of Maharashtra Seamless Limited v Padmanabhan Venkatesh and Ors. wherein it was held that the object behind prescribing the Valuation Process is to assist the 'Committee of Creditors' to take a decision on a 'Resolution Plan' properly and there is no statutory mandate under the Code that the Bid of the Resolution Applicant should match the Liquidation Value at in accordance with Regulation 35 of the CIRP Regulations.
30. The Learned Counsel for the Respondent refers to the aforesaid Judgment of the Hon'ble Supreme Court in Maharashtra Seamless case wherein at paragraphs 26 to 28 it is observed as under:
"26. No provision in the Code or Regulations has been brought to our notice under which the bid of any Resolution Applicant has to match liquidation value arrived at in the manner provided in Clause 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. This point has been dealt with in the case Essar Steel (supra).We have quoted above the relevant passages from this judgment."
"27.It appears to us that the object behind prescribing such valuation process is to assist the CoC to take decision on a resolution plan properly. Once, a resolution plan is approved by the CoC, the statutory mandate on the Adjudicating Authority under Section 31(1) of the Code is to ascertain Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 14 that a resolution plan meets the requirement of Sub-sections (2) and (4) of Section 30 thereof. We, per se, do not find any breach of the said Provisions in the order of the Adjudicating Authority in approving the resolution plan.
28.The Appellant Authority has, in our opinion, proceeded on equitable perception rather than Commercial Wisdom. On the face of it, release of assets at a value 20% below its liquidation value arrived at by the valuers seems inequitable. Here, we feel the Court ought to cede ground to the Commercial Wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. Such is the scheme of the Code, Section 31(1) of the Code lays down in clear terms that for final approval of a resolution plan, the Adjudicating Authority has to be satisfied that the requirement f Sub-section 31(1) of the Code stipulates the other point on which an Adjudicating Authority has to be satisfied. That factor is that the resolution plan has provisions for its implementation. The scope of interference by the Adjudicating Authority in limited judicial review has been laid down in the case of Essar Steel (supra), the relevant passage (para 54) of which we have reproduced in earlier part of this judgment. The case of MSL in their appeal is that they want to run the company and infuse more funds. In such circumstances, we do not think the Appellate Authority ought to have interfered with the order of the Adjudicating Authority in directing the successful Resolution Applicant to enhance their fund inflow upfront."
31. The Learned Counsel for the Respondent contends that the Appellants were not the fulltime employees of 'Corporate Debtor'/'PVS Memorial Hospital Private Limited' and their claims were not entered in the muster roll of the 'Corporate Debtor' as 'Employees' and that the 'Appellants were the consultants of the 'Corporate Debtor' and were paid professional fees and whereas the Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 15 'Doctors' who were employees of 'Corporate Debtor' were paid 'Salary'. In this connection, the Learned Counsel for the Respondent submits that the 'Consultant Doctors' were not engaged on a monthly salary and were not bound by any 'Service Rules and Regulations' of the Hospital and in fact, they were discharging only 'Professional Services' against the payment of 'Consultancy Fees'.
32. The Learned Counsel for the Respondent comes out with a plea that the 'Appellant' (being the Consultant of 'Corporate Debtor') was permitted to carry out their own private practise or independent consultation with any other Clinic/Hospital and that the 'Appellant' himself along with others providing 'Professional Services' to the 'Corporate Debtor' was practicing as 'Consultant' in various other hospitals as well, which is quite independent from Form 26 AS [Annual Tax Statement under Section 203 AA of the Income Tax Act, 1961]. In fact, there is 'no discrimination', or 'arbitrariness' among the said two categories of 'Doctors', since the 'Claims' were admitted purely on the basis of 'Claim Forms' submitted by the respective claimants.
33. The Learned Counsel for the Respondent seeks in aid of the Judgment of the Hon'ble Supreme Court in the matter of Swiss Ribbons Private Limited & Ors. Vs. Union Bank of India & Ors. [Writ Petition (Civil) No.99, 100, 115, 459, 598, 775, 822, 849, 1221 of 2018 (vide Special Leave Petition Civil No.28623 of 2018 and Writ Petition (Civil) No.37 of 2019] wherein at paragraph 20 and 54 it is observed as under:
"20. The tests for violation of Articles 14 of the Constitution of India, when legislation is challenged as being violative of the principle of equality, have been settled by this Court time and again. Since equality is only among equals, no discrimination result if the Court can be shown that there is an intelligible differentia which separates two kinds of creditors so long as there is some rational relation between the creditors so differentiated, with the object sought to be achieved by the legislation.
Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 16 This aspect of Article 14 has been laid down in judgments too numerous to cite, from the very inception."
"54. Indeed, if an "equality for all" approach recognizing the rights of different classes of creditors as part of an insolvency resolution process is adopted, secured financial creditors will, in many cases, be incentivized to vote for liquidation rather than resolution, as they would have better rights if the corporate debtor was to be liquidated rather than a resolution plan being approved. This would defeat the entire objective of the Code which is to first ensure that resolution of 89 distressed assets takes place and only if the same is not possible should liquidation follow."
34. The Learned Counsel for the Respondent refers to the Judgment of Hon'ble Supreme Court of India in K. Sashidhar v Indian Overseas Bank and Ors. (in Civil Appeal No.10673, 10716, 10917 and 29181/2018) (vide paragraphs 33, 35, 37, 38, 42 and 44) wherein the Hon'ble Supreme Court had clearly observed about the limited Judicial Review aspect of the 'Adjudicating Authority' or the 'Appellate Tribunal' to interfere with the commercial wisdom of the 'Committee of Creditors'.
Discussions:-
35. The Appellant/Applicant before the 'Adjudicating Authority' (National Company Law Tribunal, Kochi Bench) in IA(IBC) No.46/KOB/2021 in IA(IBC)13/KOB/2021 in TIBA No.11/KOB/2019 filed an 'Application' under Section 60(5) of the Insolvency and Bankruptcy Code praying for the reliefs:
(i) In rejecting the recommended 'Resolution Plan' as the same was not in violence with the Regulations 353(a), 35(b) and 35(c) of CIRP Regulations and Section 30(2)(f) of the Insolvency and Bankruptcy Code and infringes the fundamental rights enshrined under the Constitution of India thereby not complying with Section 30(2)(e) of the Code, 2016;
Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 17
(ii) In rejecting the 'Valuation Report' of Mr.R.K. Patel as it was prepared negligently without any care and caution;
(iii) and to appoint another 'Valuer' for Land and Building for complying with the Regulations 35(a), 35(b) and 35(c) of CIRP Regulations;
(iv) for passing an order by the 'Adjudicating Authority' in directing the 'Resolution Professional' and the 'Committee of Creditors' to reconvene the meeting to comply with the provisions of Insolvency and Bankruptcy Code and CIRP Regulations upholding the fundamental rights enshrined under the Constitution of India and arrived a value of 'Resolution Plan' which balances the interest of all stakeholders.
36. It is the version of the Appellant that the different of Rs.5 Crores in the amount claimed during CIRP namely Rs.200.46 Crores and the claims considered for the 'Resolution Plan' namely Rs.195.08 Cr/ores proves that the 'Resolution Applicant' was endeavored to scuttle the CIRP during COVID times with the 'Committee of Creditors' dancing to their tunes.
37. The real grievance of the Appellant/Applicant is that in terms of the 'Sanctioned Plan' the Employees of the 'Corporate Debtor' will get 99.29% of their admitted claim. However, the other 'Operational Creditor's [other than employees and workmen] is getting only 2.34% of the 'admitted claim' to an extent of Rs.13,01,55,997 who had rendered 'Health Care Services' to the patients visiting the 'Corporate Debtor' on the 'Consultancy Basis'.
38. According to the 'Appellant' [he being the 'Power of Attorney' Holder of 46 Doctors] and they are qualified professional Doctors who attend the inpatients and outpatients on a daily basis like a normal employee would perform and the significant difference lies in 'finance and accounting' perspective viz. in respect of employees, there will be deduction in respect of 'Provident Fund' and 'Employees State Insurance', whereas in the case of a Consultant Doctor, there will be deduction towards tax at source.
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39. The pith and substance of the contentions of the 'Appellant' is that in the 'Sanctioned Plan', there was inequitable provisions which discriminate the 'employee Doctors' and 'Consultant Doctors' and as such, the 'Resolution Plan' submitted by the 'Resolution Applicant' passed by the 'Committee of Creditors' is not in consonance with Article 14 of the Constitution of India and therefore, cannot be considered as one complying with all the prevailing laws for the time being in force, as mentioned in Section 30(2)(e) of the Code.
40. The other plea of the 'Appellant' is that there are discrepancies/anomalies observed in the 'Valuation Report' furnished by the 'registered Valuer' Mr.R.K. Patel which requires to be rejected in a summary manner. In this connection, the 'Appellant', to verify his stands adverts to the 'Valuation Report' dated 19.03.2020 of the Valuer Mr.R.K. Patel (in respect of Valuation of Land and Buildings of P.V.S.Memorial Hospitals Pvt. Ltd.) wherein the paragraph 1.0 introduction reads as under:
"This report was taken up at the instance of the Resolution Professional Mr.Bijoy Prabhakaran Pulipra (registration no. IBBI/IPA 002/IP N00607/2018-2019/11864) in the matter of M/s. Galaxy Cotton & Textile Private Limited (under CIRP Process), as per order CP (IB) No.332/NCLT/AHM/2018 dated 10/08/2019 of Hon'ble NCLT, Chennai M/s. PVS Memorial Hospital Ltd. (under CIRP Process) has registered office at Baherji Rd, Opp Gokulam Park Kaloor, Ernakulam, Kerala 682
017."
Further paragraph 8.2.2 of the said Valuation Report reads as under:-
"For Evaluating Fair Value of Land and Building subject land is assumed to be uncultivated freehold land and owned by M/s.Galaxy Cotton and Textiles Pvt. Ltd."
41. On behalf of the 'Appellant', a reference is made to the other Valuer Mr.Thomas Panikulam's Valuation Report who made the Valuation by 'belt Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 19 method' which sub categorise the land into separate section to enable toe identify the land area, based on its strange size. In short, the Fair Value for 194.07 Cents hospital area 78.54 Ares, Per Cent value Rs.48,56,228 was arrived at Rs.94,24,80,000 (A). However, the Valuation Report of Mr.Thomas Panikulam had arrived a Fair Value for 194.07 Cents as Rs.81,51,21,580 (B) per cent value Rs.42,00,000/- To put it precisely, the difference in Fair Value for 194.07 Cents is Rs.12,73,58,420/- = 15.62%. The crux of the plea projected on behalf of the Appellant is that the difference in adapting various methods of valuation by the two valuers had let to a difference in the value which necessitates the appointment of third Valuer as provided in Regulation 35(1)(a), (b) and (c) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Unfortunately, the 'Adjudicating Authority' had not appointed the third Valuer therefore an emphatic stand of the Appellant is that the CIRP was not conducted as per the Insolvency and Bankruptcy Code and Regulations and the 'Committee of Creditors' is not to 'waive' of any procedure enunciated under Code and the Regulations.
42. Repudiating the contentions of the 'Appellant', the Respondent has come out with a stand that except certain minor clerical errors there are no deviations/discrepancies in the final Valuation amounts and that the 'Valuers' had considered of the properties and assets of the 'Corporate Debtor' and for arriving at the Fair Value and Liquidation Value and in fact paragraph No.9 of the 'Valuation Report' of Mr.R.K. Patel (Valuer) under the heading Valuation Results reads as under:
Sr.No. Asset Description Fair Market Liquidation
Value (Rs.) Value (Rs.)
1 PVS HOSPITAL 1392453980 1068965786
COMPLEX
2 8.29 ARES LAND AT 30673000 24538400
MAMANKUZY
POTTALAM ROAD
Comp App (AT) (CH) (Ins) No.90 of 2021
Page | 20
3 FLAT 6CAT KALOOR 5139500 436875
RESIDENCY
Total (Round off) 142,82,66,480/- 109,78,72,761/-
Fair Value:
43. It may not be out of place for this 'Tribunal' to make a relevant mention that a 'Fair Value' is estimated realisable value of assets of 'Corporate Debtor' if they were to be exchanged on the Insolvency commencement date and Liquidation Value is the estimated realisable value of Assets of the Corporate Debtor, if the Corporate Debtor were to be liquidated on the Insolvency commencement date.
Land Value:
44. Indeed, the Land Value is determined in the manner specified in Regulation 35(1) and the Resolution Professional should provide the 'Fair Value and Land Value' to 'Every member of the Committee' in electronic form (vide Regulation 35 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
Fair Value Definition:
45. The expression 'Fair Value' is defined in Clause (h)(b) of sub Regulation (1) of Regulation (2) of amended Regulation means the estimated realisable value of the assets of 'Corporate Debtor' if they were to be exchanged on the Insolvency commencement date between a willing buyer and a willing seller in an arm's length transaction after proper marketing and where the parties had acted knowledgably prudently and without compulsion.
46. In terms of the amended clause (h)(a) the term 'evaluation matrix' means such parameters to be applied and the manner of applying such parameters, as approved by the committee for consideration of Resolution Plan(s) for its approval. After the receipt of the Resolution Plan(s) in accordance with the Code Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 21 and these regulations, the Resolution professional shall provide the Fair Value and the 'Liquidation Value' to every member of the committee in electronic form on receive an undertaking from the member to the effect that such member shall maintain confidentiality of Fair Value and Land Value and shall not use such values to cause an undue gain or undue loss to itself or any other person and comply with the requirements under sub section 2 of Section 29 of the Code.
47. As per substituted clause (k) of sub regulation of regulation ii of the amended regulations 2018, the express 'Liquidation Value' means the estimated realisable value of the assets of 'Corporate Debtor', if the 'Corporate Debtor' were to be liquidated on the Insolvency commencement date.
Analysis
48. In the instant case, although on behalf of the 'Appellant' a strenuous endeavour is made before this 'Tribunal' that there is a variance of 15.62% in the 'Valuation' and in this regard this 'Tribunal' points out that the value made by the two registered Valuers are only 'estimates' and certainly there will be difference in each 'Valuers Report's and to put it precisely, the difference of 15.92% as regards the Valuation of Land in the two registered 'Valuers Reports' can be termed as minimal, in view of the fact that the 'Fair Value' and 'Liquidation Value' were made, taking into account variety of considerations. Besides this, one cannot brush aside a primordial fact that the Estimated Values as furnished by the two registered Valuers can at best be an aid to the 'Committee of Creditors', to take a call on 'Commercial Decision', which cannot anyway stifle them in any manner. As such, the contra plea taken on behalf of the Appellant is not acceded to by this 'Tribunal'.
49. In so far as the plea of the Appellant that third Valuer was not appointed for reasons best known to the 'Resolution Professional' when there is a difference in the valuation made by the two registered Valuers, this 'Tribunal' at the risk of repetition points out that the difference of 15.62% between the two registered Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 22 Valuers in regard to the Valuation made is not a substantial/material one so as to warrant an appointment of a 'third Valuer' as per Regulation 35(1)(a)(b) and (c) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. On this count also, the plea of the 'Appellant' for appointment of 'third Valuer' for the purpose of Valuation is negative by this 'Tribunal'. Scrutiny of Resolution Plan:
50. It is to be pertinently pointed out that as per Section 30(2) of the Insolvency and Bankruptcy Code, 2016 the Resolution Professional is required to examine each 'Resolution Plan' received by him to confirm that the 'Resolution Plan' provides for payment of 'Insolvency Resolution Process Costs', payments of Debts of Creditors, the management of affairs of the Corporate Debtor, implement and supervision of the 'Resolution Plan', other requirements as may be specified by the Board and does not violate any Provision of law for the time being in force. As a matter of fact, the 'Committee of Creditors' may approve the 'Resolution Plan' by voting of not less than 75% of voting share on 'Financial Creditors' as per Section 30(4) of the Code. It cannot be lost sight of that the 'Committee of Creditors' ought to record reasons while approving or rejecting one or the other 'Resolution Plan'. After decision of the 'Committee of Creditors', 'Resolution Professional' is required to place the 'Decision' before the 'Adjudicating Authority' under Section 31 and that the 'Adjudicating Authority' is to take a decision in terms of Section 31 of the Code. In fact, the 'Adjudicating Authority' can scrutinise the reasoning either to accept or reject one or other objection or suggestion and also offer his own opinion.
51. As per Section 31 of the Code, if an 'Adjudicating Authority' is satisfied with the 'Resolution Plan' is approved by the 'Committee of Creditors' under Section 30(4) of the Code that it meets the requirements as contemplated in Section 30(2) of the Code, it shall by an order approve the 'Resolution Plan' Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 23 which shall be binding on the 'Corporate Debtor' 'Employees' and 'Members' 'Creditors' and other 'Stakeholders' involved in the 'Resolution Plan'.
52. It is well settled that it is not open to reopen the reasons for rejection of 'Resolution Plan' passed with 100% voting share s for adjudication. No wonder, approval for 'Resolution Plan' is to be judged with diligence and 'satisfaction' in regard to the 'Approval of plan' in writing with reasons to be recorded, of course, with due application of mind.
53. As far as the present case is concerned, the 'Resolution Plan', had not accepted the Valuation Report made by the Valuer Mr.R.K.Patel. Not resting with that, the 'Resolution Professional' had resorted to the agreed 'International Valuation Standards' and carried out the physical verification of the 'Corporate Debtor's fixed assets. Therefore, the question of appointing a 'third Valuer' on the purported ground of difference of 15.92% in the 'Fair Value' does not arise, in the considered opinion of this 'Tribunal'.
54. A cursory perusal of the 'impugned Order' dated 22.02.2021 in IA(IBC)No.46/KOB/2021 in IA(IBC)/13/KOB/2021 in TIBA No.11/KOB/2019 passed by the 'Adjudicating Authority' (National Company Law Tribunal, Kochi Bench) latently and abundantly indicates that the 'Resolution Plan' of M/s. Lissie Medical Institutions had satisfied the requirements of the ingredients of Section 30(2) of the Code, prior to the submission of the 'Resolution Plan' for approval of the 'Adjudicating Authority'. It is an axiomatic principle in law that the ambit of 'Judicial Review' to be made by the 'Adjudicating Authority' revolves around a narrow and restricted compass.
55. It is relevant to point out that the Judgment of the Hon'ble Supreme Court in Kalpra Dharanshi and another v Kotak Investment Advisors Ltd. and another (vide Civil Apeal Nos. 2943-2944 of 2020 dated 10.03.2021), wherein the Hon'ble Supreme Court at paragraph 155 to 156 had observed the following:
Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 24 "155. It would thus be clear, that the legislative scheme, as interpreted by various decisions of this Court, is unambiguous. The commercial wisdom of CoC is not to be interfered with, excepting the limited scope as provided under Sections 30 and 31 of the I&B Code.
156. No doubt, it is sought to be urged, that since there has been a material irregularity in exercise of the powers by RP, NCLAT was justified in view of the provisions of clause (ii) of sub-section (3) of Section 61 of the I&B Code to interfere with the exercise of power by RP. However, it could be seen, that all actions of RP have the seal of approval of CoC. No doubt, it was possible for RP to have issued another Form 'G', in the event he found, that the proposals received by it prior to the date specified in last Form 'G' could not be accepted. However, it has been the consistent stand of RP as well as CoC, that all actions of RP, including acceptance of resolution plans of Kalpraj after the due date, albeit before the expiry of timeline specified by the I&B Code for completion of the process, have been consciously approved by CoC. It is to be noted that the decision of CoC is taken by thumping majority of 84.36%. The only Creditor Voting in favor of KIAL is Kotak Bank, which is a holding company of KIAL, having voting rights of 0.97%. We are of the considered view, that in view of the paramount importance given to the decision of CoC, which is to be taken on the basis of 'Commercial Wisdom', National Company Law Appellate Tribunal was not correct in law in interfering with the commercial decision taken by CoC by a thumping majority of 84.36%."
Hon'ble Supreme Court's Decision:
56. At this juncture, this Tribunal points out the judgment of Hon'ble Supreme Court in Maharashtra Seamless Limited V Padmanabhan Venkatesh and Ors. (vide Civil appeal Nos 4242 and 4967-4968 of 2019 reported in Manu/SC/0066/2020) wherein at Paragraph 19 it is observed as under:
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19. "The manner in which the claims of the operational creditors shall be considered in a CIRP has been dealt with by a co-ordinate Bench of this Court (of which two of, us, Nariman J. and Ramasubramanian J. were members) in the case of Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta, decided on 15th November, 2019 in Civil Appeal Nos. 8766-8767 of 2019 (MANU/SC/1577/2019). It has been held in paragraph 53 of this judgment in the said report:
53. However, as has been correctly argued on behalf of the operational creditors, the preamble of the Code does speak of maximisation of the value of assets of corporate debtors and the balancing of the interests of all stakeholders. There is no doubt that a key objective of the Code is to ensure that the corporate debtor keeps operating as a going concern during the insolvency resolution process and must therefore make past and present payments to various operational creditors without which such operation as a going concern would become impossible. Sections 5(26), 14(2), 20(1), 20(2)(d) and (e) of the Code read with Regulations 37 and 38 of the 2016 Regulations all speak of the corporate debtor running as a going concern during the insolvency resolution process. Workmen need, to be paid, electricity dues need to be paid, purchase of raw materials need to be made, etc. This is in fact reflected in this Court's judgment in Swiss Ribbons (supra) as follows:
26. The Preamble of the Code states as follows:
An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximisation of value of assets of such persons, promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto.
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27. As is discernible, the Preamble gives an insight into what is sought to be achieved by the Code. The Code is first and foremost, a Code for reorganisation and insolvency debtors. Unless such reorganisation is effected in a time-bound manner, the value of the assets of such persons will deplete.
Therefore, maximisation of value of the assets of such persons so that they are efficiently run as going Concerns is another very important objective of the Code. This, in turn, will promote entrepreneurship as the persons in management of the corporate debtor are removed and replaced by entrepreneurs. When, therefore, a resolution plan takes off and the corporate debtor is brought back into the economic mainstream, it is able to repay its debts, which, in turn, enhances the viability of credit in the hands of banks and financial institutions. Above all, ultimately, the interests of all stakeholders are looked after as the corporate debtor itself becomes a beneficiary of the resolution scheme- workers are paid the creditors in the long run will be repaid in full and shareholders/investors are able to maximise their investment. Timely resolution of a corporate debtor who is in the red, by an effective legal framework, would go a long way to support the development or credit markets. Since more investment can be made with funds that have come back into the economy, business then eases up, which leads, overall, to higher economic growth and development or the Indian economy. What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed or as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern. (See ArcelorMittal [ArcelorMittal (India) (P) Ltd. v. Satish Kumar Gupta, MANU/SC/1123/2018: (2019) 2 SCC 1] at para 83, fn3).
(emphasis supplied)
54. This is the reason why Regulation 38(1A) speaks of a resolution plan including a statement as to how it has dealt with the interests of all stakeholders, including operational creditors of the corporate debtor. Regulation 38(1) also states that the amount due to operational creditors under a resolution plan shall be given priority in payment over financial creditors. If nothing is to be paid to operational creditors, the minimum, being liquidation value which in most cases would amount to nil after Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 27 secured creditors have been paid - would certainly not balance the interest of all stakeholders or maximise the value of assets of a corporate debtor if it becomes impossible to continue running its business as a going concern. Thus, it is clear that when the Committee of Creditors exercises its commercial wisdom to arrive at a business decision to revive the corporate debtor, it must necessarily take into account these key features of the Code before it arrives at a commercial decision to pay off the dues of financial and operational creditors. There is no doubt whatsoever that the ultimate discretion of what to pay and how much to pay each class or subclass of creditors is with the Committee of Creditors, but, the decision of such Committee must reflect the fact that it has taken into account maximising the value of the assets of the corporate debtor and the fact that it has adequately balanced the interests of all stakeholders including operational creditors. This being the case, judicial review of the Adjudicating Authority that the resolution plan as approved by the Committee of Creditors has met the requirements referred to in Section 30(2) would include judicial review that is mentioned in Section 30(2)(e), as the provisions of the Code are also provisions of law for the time being in force. Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has Adjudicating Authority finds, on a given set of facts, that the aforesaid parameters have not been kept in view, it may send a resolution plan back to the Committee of Creditors to re- submit such plan after satisfying the aforesaid parameters. The reasons given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal.
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20. It has been further been held in the case of Essar Steel (supra):
124. The other argument of Shri Sibal that Section 53 of the Code would be applicable only during liquidation and not at the stage of resolving insolvency is correct. Section 30(2)(b) of the Code refers to Section 53 not in the context of priority of payment of creditors, but only to provide for a minimum payment to operational creditors.
However, this again does not in creditors as any manner limit the Committee of Creditors from classifying creditors as financial or operational and as secured or unsecured. Full freedom and discretion has been given, as has been seen hereinabove, to the Committee of Creditors to so classify creditors and to pay secured creditors amounts which can be based upon the value of their security, which they would otherwise be able to realise outside the process of the Code, thereby stymying the corporate resolution process itself."
57. Suffice it for this 'Tribunal' to point out that neither the 'Adjudicating Authority' nor the 'Appellant Tribunal' can substitute its 'Wisdom' over the 'Commercial Wisdom' of the 'Committee of Creditors'. In fact, the 'Appellate Tribunal' has no jurisdiction to question the distribution made by the 'Committee of Creditors' as per Section 30(4) of the Code. Be it noted, that the Section 30(2)(b) of the Code refers to Section 53 of the Code not in the context of priority of payment of Creditors, but only to provide for a minimum payment to the 'Operational Creditors'.
58. In so far as the aspect of the 'Consultant Doctors' are discriminated in the 'Committee of Creditors' approved 'Resolution Plan', who are on par with 'Employee Doctors', it is to be pertinently pointed out that the 'Consultant Doctors' were not engaged on a monthly remuneration/salary and they were also not entitled to any regular employee benefits. As a matter of fact, they were performing only 'Professional Services' in respect of payment of 'Consultant Fees'.
Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 29
59. Furthermore, the Appellant(s) were allowed to carry out their private practice or independent consultation with any other hospitals/clinics and indeed, the Doctors who were 'Corporate Debtors' employees were meant to serve the 'Corporate Debtor' and they were allowed to do their own private practice or to work with any other organisation. Therefore, it cannot be said that there is either discrimination or arbitrariness in respect of the two categories of 'Doctors'. In fact, as per Section 192 of the Income Tax Act, under the caption of the 'Salary', the deduction of Income Tax was effected. Whereas in respect of Appellant(s) Income Tax was deducted as per Section 194(j) of 'Fees for Professional Services' In regard to the classification of the Creditors arrived at by the Respondent, the same was on account of the character and type of 'Claim Forms' furnished by the respective Claimants.
Equality Concept:
60. One cannot ignore a vital fact that 'Guarantee of Equality' before law is a positive concept. The principle of equal pay for equal work has to be granted only if there is total and complete identity between two employees. It is to be remembered that the 'burden of proving' the 'right and parity' in an 'employment' is only on the individual claiming such right. Moreover, it cannot be lost sight of that in respect of the concerned employees 'functions' may be same but skills and responsibilities may be really and substantially different. Viewed in that perspective, in the instant case on hand, there is a clear difference and defined arena between the 'Employee Doctors' and the 'Consultant Doctors' of the 'Corporate Debtor'. As such the contra plea taken on behalf of the Appellant(s) is not worthy of acceptance by this 'Tribunal'.
61. In the light of the forgoing detailed discussions, this 'Tribunal' taking note of the divergent contentions advanced on either side and also bearing in mind the Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 30 facts and circumstances of the present case, in a conspectus comes to a resultant conclusion that the 'Adjudicating Authority' (National Company Law Tribunal, Cochin Bench) had in IB/46/KOB/2021 in IA (IBC)/13/KOB/2021 in TIBA No.11/KOB/2019 had come to a correct conclusion on 22.02.2021 that the 'Appellant'/'Applicants' claim for rejection of 'Resolution Plan' could not be entertained at the stage when 'Resolution Professional' had filed the 'Resolution Plan' before it, and also when the Plan was to be approved. Only at the last moment, the application was filed, especially when the pronouncement of approval of the 'Resolution Plan' was scheduled on 22.02.2021. Suffice it, for this 'Tribunal' to make a relevant mention that the conclusion arrived at by the 'Adjudicating Authority' (National Company Law Tribunal, Kochi Bench) in IB/46/KOB/2021 in IA (IBC)/13/KOB/2021 in TIBA No.11/KOB/2019 whereby and whereunder it had not found any convincing reasons to interfere with the request of the 'Respondent'/'Resolution Professional' for approving the 'Resolution Plan' and consequently dismissing the 'Application' is free any legal errors. Looking at from that angle, the 'Appeal' sans merits.
Conclusion:
In fine, the present Company Appeal (AT)(INS) No.90 of 2021 is dismissed. No Costs. I.A.No.158 of 2021 (Stay Application) is closed.
[Justice Venugopal M] Member (Judicial) [V. P. Singh] Member (Technical) 09.07.2021 SE Comp App (AT) (CH) (Ins) No.90 of 2021 Page | 31